wheat paddock

Last night the USDA released their February WASDE report. The focus was mainly on South American production, which was cut, but nowhere near as much as the trade thought. Coupled with building US wheat stocks, the report was viewed as another bearish nail in the commodity coffin.

Global ending stocks were trimmed slightly on improved consumption for corn and wheat, but bean stocks increased on static Chinese demand and slowed US export business.  As always there will be questions and arguments for and against the USDA figures.  Brazilian consultancy earlier trimmed Brazil’s soybean crop to 149mmt, while the USDA cut production to 156mmt, from the previous estimate of 157mmt.

 

Wheat markets came under pressure last night as global cash markets crumbled in the face of cuts to the official Russian FOB value. The Russian Ag Ministry now seems to accept that global competition for wheat business is red hot and dropped the official ‘minimum’ price to US$235/t FOB. Private trades are regularly setting the bar even lower, but it was the new offical figure which saw wheat prices across the various trading platforms hit new seasonal lows.

 

We are likely to remain in this narrow trading range for at least another month. As we move into March and April, we’ll start to get a handle on the South American safrinha (second) corn crop and the start of the US row crop planting period. It will be interesting to watch price action across the three major commodities as the annual ‘fight for acres’ progresses, not to mention if the forecast La Niña rears its head.

Next week

The US remains a high-priced island and will likely struggle to meet export forecasts. India is emerging as something of a wildcard with wheat ending stocks at the lowest in 15 years, wheat area is up this year as the Government tries to rebuild the critical food staple. With the recent dip in prices, don’t be surprised to see importers re-engage the market which may offer some support.

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Data sources: Reuters, USDA, AHDB, Next Level Grain Marketing, Mecardo

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